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Cities fuel consumer spending

News, 18 July 2016

GUANGZHOU: Half of world's GDP growth over the next decade will come from smaller cities in developing markets as increased urbanisation drives more consumer spending, new research has revealed.

Ogilvy and Mather's recent Velocity 12 report investigates consumer trends driving economic growth in 12 emerging markets around the world.

The countries – defined by Ogilvy and Mather as Brazil, Nigeria, Mexico, China, Bangladesh, Philippines, Egypt, Pakistan, India, Myanmar, Indonesia and Vietnam – contributed 82% of global economic growth in 2015.

The report pointed to mass migration towards cities as being a feature of most fast-growing markets, especially in Asia, as the newly minted middle-class search for jobs.

(For more, including how inhabitants of these cities tend to be less brand conscious, read Warc's exclusive report in partnership with Ogilvy and Mather: How brands are harnessing urbanization in developing markets.)

Smaller cities, particularly in China, now offer more growth opportunities for brands than highly saturated tier 1 cities as consumer spending increases.

The research also showed that inhabitants of fast-growing cities tend to be less brand conscious – they are not currently overwhelmed by a lot of competing brand communications – and they care more about product experience than product reputation.

Food security and environmental safety concerns are also rising among consumers, with shoppers willing to pay a premium for "safe products", especially for children.

Although local brands are competing strongly with MNCs in many emerging markets, many consumers trust “imported products” more than domestic ones – but only if value and brand experience are demonstrated.

Therefore, the report advises, it is vital for brands to understand and leverage the cultural and physical aspects of these smaller cities in order to really connect with a new class of consumers.

Data sourced from Warc